Obamacare Favors Small Businesses

Obamacare favors small businesses and the unions aren’t happy. After all of that campaigning and the money spent by the unions on getting Obamacare passed, they finally discovered the pitfall of politicians not reading a bill before it is signed. There is a whole lot of irony in this bill with quite a bit more to be discovered. But this one caught their attention because of the potential effect on unions and their bloated demands.

Size Does Matter

Small businesses are classified as under 50 employees under Obamacare. That means that they don’t have to pay for their employees’ health care insurance. Instead, they are allowed to pass that cost on to their employees who are expected to pay for it through exchanges and tax credits. So, the size of a company does matter. Since most companies with union employees are well beyond the number 50, those companies are forced to pick up the tab of their employees’ healthcare. The disadvantage is all in the numbers. A small business with 49 employees pays zero in health care costs. A company with union employees that number in the hundreds is going to have to pay for each and every employee.

Cost Does Matter

So, let’s take that the fact that small businesses are now free of their health care costs. This means more money for them to find cheaper sources for products, to fund more advertising, and basically undercut their competition on prices. Big companies don’t have the luxury of ditching this cost. It makes their overall operating costs higher. Thus, they have to compensate for the fact that they are paying more for each individual that they hire. This makes them more reluctant to hire because of these additional costs and makes theunions more vulnerable on the bargaining table. Because like it or not, their business still has to compete. If the company dies, the union dies with it. Now, their business is competing with a bunch of smaller businesses that don’t have the costly overhead of health care and pensions.

Hiring Costs Matter

Hiring costs are a huge deal. Small businesses no longer have to add health care costs into their hiring equations. This makes it easier to justify hiring more people for their business. But they are limited on the number of individuals they can hire. It is kind of a mixed good news/bad news thing. Yes, there might be some hiring — but you can fully expect the businesses who maybe have 53 or 54 employees to lay off a few individuals to meet that 49 threshold. On the flip side, the big companies have to automatically configure health care costs into their hiring equations. With higher costs, they need higher sales to pull that off. It might not be a big problem for a company like Apple that has strong sales. But for a company like JC Penney which is already on the verge of bankruptcy, they simply aren’t equipped to hire new staff because their sales can’t justify it. In fact, if these costs become too much of a reality, you will see a dramatic shift away from employees and more dependence on the internet, which is a lot cheaper than hiring people. Thus, more layoffs from big businesses are likely coming down the line.

This is one of the ironies packed into Obamacare and unions aren’t happy. This weakens their bargaining position considerably. Like it or not, those big perks that they were once able to drain companies of are no longer viable. The ironic thing is that they supported this bill. They wanted it passed without regard to what it contained. Now, it seems they are finally discovering what the rest of us already knew, that the bill should never have been passed without at least being read first.